Discovery — Rent review clause — Application for leave to appeal against interim award of arbitrator ordering discovery — Information relating to profits of tenants’ business — Admissibility — Discoverable documents not limited to documents admissible in evidence — Leave to appeal refused
there appears to have been a question as to whether the role of the person from
whom an appeal was sought was that of an arbitrator or a valuer, the judgment
in the present case was given on the basis that he was an arbitrator — The
order for discovery which gave rise to contention was an order to discover
documents and information relating to the rents from licences granted by the
tenant of the subject premises — These were industrial premises licensed for
use as small industrial workshops — This meant that the tenants were to be
asked to disclose material relating to the actual profits of their business —
The argument against this was based on the general principle that admissible
evidence as to profit-earning capacity for the purpose of a rent review must be
confined to that which is available to prospective tenants in the hypothetical
open market — This was the principle discussed in Cornwall Coast Country Club v Cardgrange and
Electricity Supply Nominees Ltd v London Clubs Ltd — It was contended that the question on which
leave to appeal was sought arose not only in relation to the preliminary
process of discovery but also in relation to evidence at the hearing
Vice-Chancellor rejected this contention on the ground that discoverability is
not limited to documents which would be admissible in evidence — It is clear
law that all information and documents which may reasonably be used either to
advance a party’s own case or to destroy his opponent’s case must be disclosed
— The disclosed documents may not be tendered in evidence; they may be used
only in cross-examination — The Vice-Chancellor was far from satisfied that the
present case was one in which the decision of the point ‘could substantially
affect the rights of one or more of the parties’, to quote the wording of
section 1(4) of the Arbitration Act 1979
kind of interim appeal should not be brought — The arbitrator should decide the
substance of the matter as quickly as possible, saving delay and substantial
expense — It might be that, if the discovered material was used in evidence,
the arbitrator would make his award in the alternative, one version taking into
account the information produced, the other leaving it out of account — Leave
to appeal refused
The following
cases are referred to in this report.
Cornwall
Coast Country Club v Cardgrange Ltd [1987] 1
EGLR 146; (1987) 282 EG 1664
Electricity
Supply Nominees Ltd v London Clubs Ltd
[1988] 2 EGLR 152; [1988] 34 EG 71
This was an
application by Urban Small Space Ltd, tenants of industrial premises, for leave
to appeal from the interim award of Mr L P Abbas FRICS ordering discovery of
certain documents relating to rents received by the applicants from licensees
occupying workshops in the premises. The respondents were the landlords,
Burford Investment Co Ltd.
Kirk Reynolds
(instructed by Booth & Blackwell) appeared on behalf of the applicants;
Paul Morgan (instructed by Green David Conway & Co) represented the
respondents.
Giving
judgment, SIR NICOLAS BROWNE-WILKINSON V-C said: This is an application
for leave to appeal from an interim award made by an arbitrator, Mr L P Abbas
[FRICS], whereby he ordered discovery of certain documents. I have referred to
him as an arbitrator, but, as I understand it, he is an expert appointed to
give a valuation on a rent review clause. The period to which the reviewed rent
will apply is the period 1983-1988 — that is to say, a period now concluded.
The arbitrator ordered discovery of the documents and information relating to
licences granted by the tenant of the demised premises, in particular the rents
received under such licences. The demised premises were industrial premises as
to which the tenant granted a number of licences for use as small industrial
workshops.
Leave to
appeal against an arbitrator’s award under the statute can be given only if the
court, having regard to all the circumstances, considers that the determination
of the question of law concerned could substantially affect the rights of one
or more of the parties. In addition, the House of Lords in The Nema and The
Antaios have given the clearest direction that the purpose behind the Act
is to ensure that arbitrations are speedy, cheap and untechnical, so far as
possible, and that leave to appeal on points of law should be sparingly given.
I confess that
my initial reaction in this case was that an appeal on the matter of discovery
was exactly the type of appeal that the House
is clear authority at first instance that information relating to the
profitability of the tenants’ business is not admissible in fixing the rent of
the premises, even if it had been fixed on the basis of notional profitability.
That is because, it is said, the only relevant information is that which would
be available to the public at large in negotiating the hypothetical rent and
that information would not include the confidential business information of the
actual tenant.
It is suggested
to me that the question on which leave to appeal is sought not only arises in
relation to discovery but will also necessarily arise at the substantive
hearing. In my judgment, that is not necessarily so. I think the issue on
discovery is not the same issue as the evidence which is ultimately proper to
take into account in fixing the rent. Assuming, as I must for present purposes,
that the decisions of Scott J in Cornwall Coast Country Club v Cardgrange
Ltd* and Hoffmann J in Electricity Supply Nominees Ltd v London
Clubs Ltd† are correct as to the
admissibility of such evidence for the purpose of fixing the rent, the question
of what is a discoverable document is not limited to documents admissible in
evidence: all information and documents which may be used either in making the
parties’ case or in destroying the other parties’ case must be discovered.
*Editor’s
note: Reported at [1987] 1 EGLR 146.
† Editor’s
note: Reported at [1988] 2 EGLR 152.
Therefore, I
do not think that the exact point which has been decided will necessarily arise
again at the hearing. It may do, but it may not. The disclosed documents may
not be tendered in evidence or used only for cross-examination. I am,
therefore, far from satisfied that it is a case in which the decision of the
point could substantially affect the rights of the parties. I think it is
important that this kind of interim appeal should not be brought. The
arbitrator should decide the substance of the matter as quickly as possible,
saving delay and substantial expense. It has taken six months from the date of
the interim award to get this application before this court. That is not right.
It may be
that, if the discovered material is used in evidence, the arbitrator will think
it right to make his award on two alternative bases, one taking into account
the information produced, if he thinks it relevant, the other leaving it out of
account. Then and only then will it be sensible to entertain the question whether
the matter of law involved is such as to make leave to appeal relevant. For
those reasons I refuse leave to appeal.
